Garanti sees acceleration in corporate loan growth in Turkey

Growth in Turkish corporate loans is expected to accelerate next year, putting the expansion on a par with growth in consumer lending, Garanti BBVA Chief Executive Officer Recep Baştuğ said.

Rate cuts by the central bank since July have helped consumer loan growth in Turkey the most, but the outlook for corporate borrowing is now improving, with an expected decline in Turkey’s risk premium and the cost of funding, Baştuğ said, Dünya newspaper reported on Monday.

Turkey’s central bank has slashed interest rates by 12 percentage points since July, halving the benchmark from 24 percent, as inflation slowed and after President Recep Tayyip Erdoğan sacked and replaced its governor for failing to follow government orders.

The central bank’s interest rate policy for next year will be driven by the inflation outlook, Baştuğ said. Consumer price inflation is expected to remain in a band between 11 percent and 12 percent for the first half of 2020, driven by seasonal effects, prices in the service industry and wage hikes, he said.

Inflation is likely to end next year at below 9 percent, barring any serious financial shocks, Baştuğ said. Therefore, Garanti expects the central bank to lower interest rates gradually, he said.